Help! Interest accrues MONTHLY while in school..

[chiz2kul]

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Do I bite?
So I am in a slight dilemna.
I'm not up to par with all these financial/interest rate shtizles, so I need some advice.
I am an international student, so Stafford loans and all are out of my reach.
A school i'm considering has a private loan option for me.

Pros:
No co-signer needed.
Borrow as much as you need
Defer payment till during residency

Cons:
6.5% (is that a con?)
Interest accrues on the loan, and capitalizes MONTHLY 😱

I'll be needing to borrow about $25,000 per yr.
How much would I be owing at the end of med school? And how much interest wld be added, seeing that the interest capitalizes monthly?
Are there private loans (that wld require a co-signer) that are better than this option?

Thanks!

 

[Wacaggie]

Your first question should be if this is a variable or fixed rate at 6.5%. Capitilizing anually versus monthly versus every second really doesnt make a huge difference. The big reason why Stafford loans are so great, I guess this doesn't work for you because you can't get them, are that they don't capatilize until the very end. It saves you a little money and any little bit helps.

For a private loan capitalization monthly seems about right to me. It would either be that or quarterly.

If this loan is a fixed rate then you will be seeing about $17900 in interest by the 48th month. So in comparison you would have seen $17300 in interest if it capitalized yearly. Ultimatly only a 0.5% increase in your total principle.

Again the real question is whether this is a fixed or variable rate loan.

 

[chiz2kul]

Your first question should be if this is a variable or fixed rate at 6.5%. Capitilizing anually versus monthly versus every second really doesnt make a huge difference. The big reason why Stafford loans are so great, I guess this doesn't work for you because you can't get them, are that they don't capatilize until the very end. It saves you a little money and any little bit helps.

For a private loan capitalization monthly seems about right to me. It would either be that or quarterly.

If this loan is a fixed rate then you will be seeing about $17900 in interest by the 48th month. So in comparison you would have seen $17300 in interest if it capitalized yearly. Ultimatly only a 0.5% increase in your total principle.

Again the real question is whether this is a fixed or variable rate loan.

Thanks for your reply.
It is a variable rate loan...

 

[TMP-SMX]

Be glad you only need 25k and that you have access to that amount of loans. Most international students don't have that luxury. 25k is very cheap. What school is this? My tuition alone is more than 25k then I have cost of living on top of that.

 

[chiz2kul]

Be glad you only need 25k and that you have access to that amount of loans. Most international students don't have that luxury. 25k is very cheap. What school is this? My tuition alone is more than 25k then I have cost of living on top of that.

Yes, I am glad and exceedingly grateful that I have access to that amount of loans.
After my scholarship n expected parental contribution, thats how much I have left that may have to go into loans...

 

[dragonfly99]

The variable rate loans' rates might go up. I guess you could always borrow the money for the first year, and then if the rates get outrageous after 1st year, you could always look around for other private loan options at that time. 6-7% is a good rate for a student loan, so right now I'd say it's a decent loan.
Sometimes state medical associations of your state or other entities (like banks) will loan medical students money, but I don't think you'd get a better rate than the 6-7% you are getting with this loan currently.

 

[chiz2kul]

The variable rate loans' rates might go up. I guess you could always borrow the money for the first year, and then if the rates get outrageous after 1st year, you could always look around for other private loan options at that time. 6-7% is a good rate for a student loan, so right now I'd say it's a decent loan.
Sometimes state medical associations of your state or other entities (like banks) will loan medical students money, but I don't think you'd get a better rate than the 6-7% you are getting with this loan currently.

Thanks for the advice m8.